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Sinha swears by reforms; moots regulatory role for RBI, quarterly budgets

Finance Minister Yashwant Sinha today envisaged a revised role for the Reserve Bank of India, giving the central bank only regulatory powers.

Addressing the annual session of the Confederation of Indian Industry in New Delhi, Sinha also called for moving towards a central value added tax or VAT and expanding the automatic approval route with the Foreign Investment Promotion Board, now available for 'odd and exceptional' cases.

These were part of the Bharatiya Janata Party-led government's agenda for second generation reforms, which would be put to public debate shortly.

''The prime minister has already seen them and we will soon be seeking public response on the same,'' he added.

''We are planning to move ahead vigorously. The two areas we wanted to work on were to push through all the bills and to go ahead with second generation reforms.''

On the pending bills and the divestment target, the finance minister said the government will go ahead with all the previous proposals. However, he was non-committal whether the government would seek to issue ordinances in place of the bills.

''The bills are pending. It is a grey area with the Lok Sabha being dissolved. We could adopt the route of passing the pending bills through an ordinance but being a grey area, we have to tread this path carefully.''

On the revised role envisaged for the RBI, the finance minister said, ''The RBI need not take equity in the banks. Nor should it be on the board of the banks. It should have only regulatory powers and be only a regulatory authority.'' These would form part of the banking sector reforms being planned.

The government is also proposing a central VAT instead of the present three slabs. ''We are also putting forth a medium-term strategy for fiscal correction nationally, including the process of binding the tax regime of the states with the central tax structure.''

Regarding the finance bill, Sinha said though he was happy that the bill was passed, ''I am not happy at the manner in which it was passed.''

He further stated that certain amendments and clarifications in the rules of the finance bill would be made by the government as ''it was within our purview. It is only when we have to seek an amendment to the Act that we have to go through Parliament.''

Under the second generation reforms, the government is also planning to seek quarterly budgets from spending ministries, work on the size of government, put a cap on borrowings, amend the Income Tax Act by taking a re-look on the exemption levels, put in place a new competition policy and move towards better land reforms.

He said the dissolution was a ''small interruption. It will be over soon, we will come back and take ahead reforms.''

In a lighter vein, the minister said, ''This is like we used to have in Doordarshan till some time back -- 'Sorry for the interruption'. This is temporary and will soon fade away.''

Addressing a query from the floor, he stated that the setback to the feel-good factor was only temporary. ''There are indications in the economy and capital markets that things are beginning to look up. The process has already started. It is now upon the industry to take note of these indications and move ahead. The uncertainty appears to be lifting and the feel-good factor will come back once again.''

However, Sinha did not agree to imposing an entry code for politicians saying, ''This would mean interfering with the democratic process.''

The fault, he said, was with the public at large. ''You consider politics a dirty game, best left to dirty people, therefore, leaving the field open for undesirable elements. Why cannot more professionals and well-informed people enter politics?'' he asked.

UNI

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